CHINA’S top coal miner Shenhua Group Corp. will take over China Guodian Group Corp., among the country’s top five State power producers, in a deal that will create the world’s largest power utility worth US$278 billion.

The companies have been in talks about a merger for several months as the government aims to shake up its indebted and inefficient State sector, streamline the number of companies and create globally competitive firms in sectors including power generation, shipping and metals.

The Guodian-Shenhua deal was announced late Monday by the State-owned Assets Supervision and Administration Commission (SASAC) in a one-line statement that gave no other details.

In a filing later Monday, Shenhua’s listed unit China Shenhua Energy Co. said its parent will absorb Guodian as part of the deal and the new company will be called National Energy Group.

China has merged 15 SOEs since 2015 and currently manages 103 — a number that could eventually fall to about 40, domestic media reported.

The combined entity would have an installed capacity topping 225 gigawatts (GW), leapfrogging EDF and Enel to become the world’s biggest power company by capacity, according to Frank Yu, principal consultant for Asia-Pacific Power and Renewables at Wood Mackenzie.

It would also be the largest wind power developer with 33 gigawatts of capacity and the biggest coal producer, he said.

The deal will provide Guodian with a captive coal supply that will help manage its price risks for its main raw material, give it access to Shenhua’s infrastructure of rail, harbors and shipping fleet, as well as its deep cash reserves that will help the power producer pay off its large debts, analysts said.

For Shenhua, a merger with a major State power provider such as Guodian — also a leading hydropower and renewables developer — could ease its dependence on polluting coal as the country looks to move toward cleaner fuel.

“The union of coal and utilities means both Shenhua and Guodian will balance their risks from commodities, but it will not necessarily boost its (the combined company’s) profit level,” said Li Rong, power analyst with SIA Energy.